Steel industry: high prices bring Salzgitter back to profit

Steel industry: high prices bring Salzgitter back to profit

The year 2020 was extremely tense for the German steel industry, now there is more confidence in this sector too. What is good for producers can mean higher costs for customers.

Germany’s second largest steel manufacturer Salzgitter was back in the black in the first half of the year thanks to higher prices and better overall demand.

After the corona-related losses in mid-2020, the group now achieved the highest pre-tax profit in 13 years, according to Wednesday.

In ongoing business, the company was able to turn the minus of around 128 million euros from the first half of the previous year into a plus of almost 306 million euros. After taxes, Salzgitter last remained around 231 million euros, after a deficit of 145 million euros in the first six months of the previous year.

In the past few months, steel producers have often been able to achieve higher prices from customers in the automotive or mechanical engineering industries. In the construction industry, components with important metal alloys became scarce in some places. VW CEO Herbert Diess recently spoke of a “sharp rise in raw material prices”.

The high inflation also extends to a number of base materials. The commodity price index of the Hamburg World Economic Institute (HWWI) was 87 percent higher in July than in the previous year. The increases can be explained, among other things, by the weak economic performance and the lower price level in the first Corona year 2020, but some also point to possible supply bottlenecks. According to economists, iron ore, which is essential for steel production, became more expensive on average last month, albeit only slightly. Other industrial raw materials, on the other hand, became cheaper.

In the years to come, Salzgitter intends to gradually become more independent of the coking coal, which is also required and which produces a great deal of climate-damaging CO2 when it is used. “Our ambition is to be able to start hydrogen-based steel production as early as the end of 2025,” announced CEO Gunnar Groebler. The main plant already has a first pilot plant for the upstream production of hydrogen with green electricity. The new process is expected to reduce CO2 emissions by 30 percent by 2030 and by 95 percent by 2050.

Salzgitter was able to increase its half-year sales from 3.6 billion euros to 4.4 billion euros. At the end of June, the group had a total of around 24,000 employees, around 600 fewer than a year ago. The current rail strike in freight traffic has no effects for the time being.

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